Statement of Accounts 11/12 Cover

SOMERSET COUNTY COUNCIL STATEMENT OF ACCOUNTS 2013/14 AUDITED & APPROVED ACCOUNTS K.B.Nacey CPFA Director - Finance and Performance County Hall, Taunton, Somerset TA1 4DY WWW.SOMERSET.GOV.UK Contents Note Page No. Chief Financial Officer’s Introduction 1 Statement of Responsibilities 11 Independent Auditor’s Report to Members of Somerset County 12 Council Annual Governance Statement 2013/14 16 Statement of Accounting Policies 27 Movement in Reserves Statement 45 Balance Sheet 47 Comprehensive Income and Expenditure Statement 49 Cash Flow Statement 50 Notes to the accounts: 1 Prior Period adjustments 51 2 Accounting Standards that have been issued but have not yet been 54 adopted 3 Critical judgements in applying Accounting Policies 56 4 Assumptions made about the future and other major sources of 57 estimation uncertainty 5 Events after the Balance Sheet Date 58 6 Adjustments between Accounting Basis and Funding Basis under 59 Regulation 7 Transfers to/from Earmarked Reserves 61 8 Analysis of our spending on services 62 9 Amounts Reported for Resource Allocation Decisions 64 10 Other Operating Expenditure 68 11 Surplus or deficit on revaluation of fixed assets 68 12 Financing and Investment Income and Expenditure 68 13 Taxation and Non Specific Grant Income 69 14 Trading Operations 69 15 Pooled Budgets 71 16 Members’ Allowances 72 17 Senior Officers' Remuneration 73 18 Termination Benefits 76 19 External Audit Fees 77 20 Dedicated Schools Grant 77 21 Government Grant Income 78 22 Partnerships and Related Party Transactions 79 23 Property Plant and Equipment 80 24 Intangible Assets 84 25 Impairment Losses 85 26 Assets Held for Sale 85 27 Leases 85 28 Private Finance Initiatives (PFI) and Similar Contracts 89 29 Heritage Assets – 5 year summary of transactions 91 30 Heritage Assets – Further information on our Museum collections 91 31 Financial Instruments: Short-term/ long-term investments 95 Long Term Debtors 95 Short-term/ long-term borrowing 95 32 Nature and extent of risks arising from financial instruments 97 33 Short Term debtors 102 34 Short Term creditors 102 35 Other long term liabilities 102 36 Provisions 103 37 Revenue and Capital Grants/Contributions Receipt in Advance 104 38 Usable Reserves 105 39 Unusable Reserves 106 40 Cash and Cash Equivalents 111 41 Cash Flow – Operating activities 111 42 Cash Flow – Investing activities 112 43 Cash Flow – Financing activities 112 44 Capital Expenditure and Capital Financing 113 45 Contingent Liabilities 114 46 Contingent Assets 114 47 Trust Funds 114 48 Defined Benefit Pension Schemes 115 Group Accounts 124 Pension Fund 125 Glossary of Terms 156 Chief Financial Officer’s introduction This section highlights some of the most important matters reported in the accounts and comments on any issues that have had a major effect on our finances. Introduction The annual Statement of Accounts sets out a summary of our financial affairs for 2013/14 and shows our financial position as at 31 March 2014. It includes the following statements and accounts: Movement in Reserves Statement; Balance Sheet; Comprehensive Income and Expenditure Statement; Cash Flow statement; Group accounts; Pension fund accounts. An explanation of each of these statements is included within the statement itself. We use some technical terms in these accounts, which we have explained in the glossary on page 156 Important developments this year Financial Context In addition to the continued austerity measures impacting hard on Local Government, there were also significant changes to our funding mechanisms during 2013/14, following the localisation of Business Rates and Council Tax Benefits. Overall, the Council’s core revenue funding was reduced by nearly £18m, or 5%. On top of this, the County Council also became responsible for a number of new functions and activities which transferred from other sectors, such as Public Health from the NHS and Community Care Grants and Crisis Loans from the Department for Work and Pensions. Flooding During the winter of 2013/14 unprecedented levels of flooding occurred across the Somerset Levels and severely impacted communities within the flooded areas and beyond. The floods reached critical levels and the impact for the communities was so significant that a major incident was called, which invoked joint working with the Police, Military, Environment Agency and District Councils, lead by a joint command. Although the financial cost has not been significant during 2013/14 there will be considerable costs for preventative works during 2014/15 and in recognition of the extraordinary circumstances Central Government paid over grant late in March to fund some of the work. This can be seen below in Table 1 within “Other Services” and on page 49 in the Comprehensive Income and Expenditure Account (Environmental & Regulatory Services) which shows within income the amount £18m of unspent grant at the end of the year which is ring-fenced and will pay for the works in 2014/15. Schools converting to Academy status Somerset schools have continued to opt to transfer to Academy status. During the year eighteen schools on the Authorities balance sheet transferred with a further three that transferred early 2014/15. These transfers continue to have an impact upon our finances, accounting for the year on year reduction in our schools reserves. This does not affect our ability to deliver services or the funding allocated to services. 1 Public Health The Health and Social Care Act 2012 transferred Public Health responsibilities from the NHS to upper tier and unitary authorities. As a result of this change in responsibility on 1 April 2013 SCC took on new responsibilities and some Public Health Officers transferred to SCC from the NHS. This can be seen in the Comprehensive Income and Expenditure Account on page 49 This transfer of services gives local authorities opportunities to tailor local solutions to local problems, and to focus health and care services together to improve health and reduce inequalities. The funding of this service is met by ring-fenced government grant. Revenue spending in 2013/14 In February 2013, we agreed our budget for 2013/14 at £329.4 million. This resulted in a band-D council tax of £1,027.30, which is the same as in 2012/13. The following table shows that our actual spending was £335.9 million against the budget of £329.4 million which includes transfers. These figures are based on service responsibilities, rather than the total cost of providing services (including charges for support services, using assets, and adjustments to show the true cost of providing pensions to employees), which is used in the income and expenditure account on page 49. Table 1: Comparison of actual spend against budget 2013/14 2013/14 Service budget actual spending Difference £millions £millions £millions % Adults & Health - Operations 82.8 83.5 0.7 0.8 Children & Families - Operations 42.1 43.1 1.0 2.4 Learning Disabilities - Operations 26.0 27.8 1.8 6.9 Somerset Waste Partnership 25.3 25.4 0.1 0.4 Adults & Health - Commissioner 23.0 21.4 -1.6 -7.0 Learning & Achievement - Operations 16.3 15.9 -0.4 -2.5 Children & Learning - Commissioning & Schools 29.7 28.8 -0.9 -3.0 Highways & Traffic Management 13.0 13.4 0.4 3.1 Transporting Somerset - Public, FE & Concessionary 13.1 12.2 -0.9 -6.9 Other Direct Services 16.0 -2.5 -18.5 -115.6 Support Services 46.2 45.4 -0.8 -1.7 333.5 314.4 -19.1 -5.7 Non-service items (central costs, such as bank charges, 28.9 21.5 -7.4 -25.6 that cannot be linked to a particular service) 362.4 335.9 -26.5 -7.3 Transfer to or from (-): the carry-forward fund -24.1 2.5 26.6 revenue reserves which we have set aside -4.6 -4.6 0 the capital fund 1 0 -1 general reserves -5.3 0.2 5.5 329.4 334.0 4.6 Funded by: Revenue Support Grant 89.7 89.7 0 Business Rates 55.2 59.8 4.6 Council Tax 184.5 184.5 0 329.4 334.0 4.6 Carry forward fund Services are allowed to spend up to their approved budgets. In 2013/14, this was £329.4 million. If services do not spend up to the value of their budgets they are allowed to save any amounts to use in future years, this is called the ‘carry forward fund’. Services also have other 2 reserves, which they have set aside for certain purposes. In addition, some spending (for items outside our services’ control) is funded from general reserves. For more analysis of the movements within our earmarked reserves see Note 7 in the main Statement of Accounts. Of the £39.714 million total carried forward in 2013/14, £18.090 million is for individual school budgets and cannot be used for anything else. This is a decrease of £1.973 million over the previous year and is due mainly to the movement of schools to academy status. The other £21.624 million relates to carry forwards for particular services. Financing The diagrams below show where our money came from, which services we spent it on and how we spent it. It is important to note that the contribution from the local community through the Council Tax represents just 22% of our funding needs. Analysis of total revenue spending (£821.7 million) Where the money came from 3 Which services we spent it on How we spent this 4 Capital spending in 2013/14 Alongside our day-to-day costs, we spend money on assets such as buildings, roads, vehicles and information and communications technology. This is capital spending.

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